Can sombody tell me when should a liability be created? I mean when should an Invoice be posted in ledger?? below are ther conditions; After receiving the bill? After receiving sales tax invoice? After receiving GRN (Goods received note). Would sombody help me in this, It would be higly appreciated.
Invoice Liability Issue
Answers
A liability should be created when it is probable that the future event will occur and the amount of the liability can be reasonably estimated.
Upon receiving the bill, if you are certain that this a liability, you should record it on General Ledger as a payable/ liability.
1
But I think it only becomes probable after the goods are received not before?
If you are talking really about product purchases, then the terms of purchase will likely drive when you record the asset and the liability.
If terms are EX WORKS at the supplier, then the minute the goods are picked up there for delivery to you, they are yours. From then on the goods are simply in transit until they reach your destination. However, if the supplier is really close by (delivery takes up to a day or two, not days), maybe you can wait until the goods arrive at your warehouse to record the asset and liability.
If terms are DELIVERED at your warehouse, then when you receive the goods, they are yours.
Filed Under:
Accounting